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TORONTO — Target Corp. is embarking on a major transformation as it confronts a swiftly changing consumer environment. This was the major theme that executives presented during the retailer’s Financial Community Day here recently.
Target Corp. is embarking on a major transformation as it confronts a swiftly changing consumer environment. This was the major theme that executives presented during the retailer’s Financial Community Day here recently.
Chairman, president and chief executive officer Gregg Steinhafel prefaced his remarks by recalling the last major change program undertaken by Target around 1990, when it moved beyond a focus on price alone to differentiate itself with more upscale discretionary goods and a more pleasant store experience. Now, faced with what he described as unprecedented change in the consumer landscape and the retail industry, the time has come for another transformation of similar or even greater scale.
"Our guests’ daily activities and shopping habits are converging in dramatically new ways," he said. "Technology is changing nearly every aspect of consumers’ lives. Work, shopping, entertainment and communication are all happening simultaneously."
That change represents not only a challenge but an opportunity to gain market share, Steinhafel added, and doing so will require developing new capabilities and changing the company’s culture and way of interacting with customers.
"Today we’re enhancing the level of service in our stores by training our teams to go beyond answering basic navigation questions to offering solutions," he said. "We’re enabling this change by making investments in technology to equip the team to solve problems quickly.
"This is a major cultural change in our stores, moving beyond an operational model to a service and sales orientation."
The leading edge of this wave of change is visible in some of Target’s beauty and baby departments, where dedicated service specialists are trained to deliver solutions rather than simply direct customers to a specific aisle. According to Kathee Tesija, executive vice president of merchandising and supply chain, these initiatives are intended to reinvent the store experience in key categories. In July, Target began testing in the Chicago market a revamped baby department that features a new layout and enhanced technology, content and service. "While results are still preliminary, we’re seeing strong comp [store sales] growth in these test stores," she pointed out.
Similarly, Target has introduced in more than 200 stores a beauty concierge who offers information and advice to customers, and that number will double by early 2014, Tesija said. Moreover, next year the whole department will receive a makeover, with more contemporary fixturing, lighting, signage and graphics to lend a more upscale ambience.
Importantly, Target is leveraging its supply chain capabilities to implement market segmentation strategies with store-level customized assortments — a marked change from a decade ago when, as Tesija noted, Target stores were generally interchangeable from one location or market to another. As a result, although the average number of SKUs per store has dropped, the number of unique planograms has tripled to more than 375,000.
Not surprisingly, digital technology will play a central role in the Target transformation, going far beyond having an effective online business. Casey Carl, president of multichannel and senior vice president of enterprise strategy for Target, told analysts that the company has been hiring outside talent to help drive its digital development.
In addition, while Target is expanding its online assortment, it will also make its entire store assortment, including grocery items, viewable online before the end of November, although not all in-store items will be available for online ordering.
Target has long been known for its masterful marketing touch, but there, too, change is in the works, driven by digital and mobile technologies. The impact of technology on multiple aspects of people’s lives is changing the way Target connects with its guests and requires new thinking, said Jeff Jones, executive VP and chief marketing officer.
